Clues from Today’s Nasdaq Underperformance
By
Rennie on Tuesday, February 23rd, 2010 at 1:08 pm
The Nasdaq100 is set to post its third consecutive lower close Tuesday and it’s set to underperform the S&P500 for the third day in a row as well. That’s usually an indication that the technology sector will remain under pressure over the next few sessions. The table below highlights the last thirty separate instances in which the NDX closed lower three consecutive sessions and underperformed the SPX on a percentage basis each day…
NDX Down Three Days, Underperforms SPX Each Day
11/20/09… NDX +1.7% three sessions later (*)
10/03/08… NDX -9.5% three sessions later
09/03/08… NDX -3.8% three sessions later
06/24/08… NDX -2.5% three sessions later
06/10/08… NDX -0.3% three sessions later
04/09/08… NDX -1.9% three sessions later
02/19/08… NDX +0.5% three sessions later
01/08/08… NDX +0.1% three sessions later
11/12/07… NDX +2.1% three sessions later (*)
01/18/07… NDX -1.1% three sessions later
12/20/06… NDX -1.4% three sessions later
08/08/06… NDX +0.1% three sessions later
07/14/06… NDX +1.9% three sessions later (*)
07/07/06… NDX -2.1% three sessions later
06/06/06… NDX -1.6% three sessions later
05/11/06… NDX -2.0% three sessions later
03/07/06… NDX -0.8% three sessions later
02/06/06… NDX -0.2% three sessions later
01/18/06… NDX -2.4% three sessions later
12/30/05… NDX +3.7% three sessions later (*)
10/27/05… NDX +2.2% three sessions later
06/24/05… NDX +0.3% three sessions later
04/15/05… NDX -0.1% three sessions later
02/18/05… NDX +0.2% three sessions later
01/21/05… NDX +0.4% three sessions later
01/03/05… NDX -2.9% three sessions later
07/14/04… NDX -1.4% three sessions later
07/06/04… NDX -0.4% three sessions later
04/28/04… NDX -2.6% three sessions later
11/17/03… NDX -2.2% three sessions later
In 19 out of 30 cases, or 63% of the time, the NDX closed lower three days later, a decent but not huge edge over the 46% at-any-time odds for a lower Nasdaq three sessions later. More noteworthy is the Nasdaq’s limited upside potential even when it does manage to rally. Consider that on any given day in the 2003-2010 time frame, the NDX has rallied more than 0.5% over the next three sessions 43% of the time. But when the NDX has closed lower and underperformed the SPX during each of the last three sessions, the Nasdaq gained more than 0.5% three days later only 13% of the time, significantly below random. For this setup to be triggered Tuesday, the Nasdaq needs to close lower and continue to underperform the S&P heading into the close (currently the NDX is off 1.6% vs. a 1.3% drop for the SPX).
Clues from Today’s Nasdaq Underperformance
By Rennie on Tuesday, February 23rd, 2010 at 1:08 pmThe Nasdaq100 is set to post its third consecutive lower close Tuesday and it’s set to underperform the S&P500 for the third day in a row as well. That’s usually an indication that the technology sector will remain under pressure over the next few sessions. The table below highlights the last thirty separate instances in which the NDX closed lower three consecutive sessions and underperformed the SPX on a percentage basis each day…
NDX Down Three Days, Underperforms SPX Each Day
11/20/09… NDX +1.7% three sessions later (*)
10/03/08… NDX -9.5% three sessions later
09/03/08… NDX -3.8% three sessions later
06/24/08… NDX -2.5% three sessions later
06/10/08… NDX -0.3% three sessions later
04/09/08… NDX -1.9% three sessions later
02/19/08… NDX +0.5% three sessions later
01/08/08… NDX +0.1% three sessions later
11/12/07… NDX +2.1% three sessions later (*)
01/18/07… NDX -1.1% three sessions later
12/20/06… NDX -1.4% three sessions later
08/08/06… NDX +0.1% three sessions later
07/14/06… NDX +1.9% three sessions later (*)
07/07/06… NDX -2.1% three sessions later
06/06/06… NDX -1.6% three sessions later
05/11/06… NDX -2.0% three sessions later
03/07/06… NDX -0.8% three sessions later
02/06/06… NDX -0.2% three sessions later
01/18/06… NDX -2.4% three sessions later
12/30/05… NDX +3.7% three sessions later (*)
10/27/05… NDX +2.2% three sessions later
06/24/05… NDX +0.3% three sessions later
04/15/05… NDX -0.1% three sessions later
02/18/05… NDX +0.2% three sessions later
01/21/05… NDX +0.4% three sessions later
01/03/05… NDX -2.9% three sessions later
07/14/04… NDX -1.4% three sessions later
07/06/04… NDX -0.4% three sessions later
04/28/04… NDX -2.6% three sessions later
11/17/03… NDX -2.2% three sessions later
In 19 out of 30 cases, or 63% of the time, the NDX closed lower three days later, a decent but not huge edge over the 46% at-any-time odds for a lower Nasdaq three sessions later. More noteworthy is the Nasdaq’s limited upside potential even when it does manage to rally. Consider that on any given day in the 2003-2010 time frame, the NDX has rallied more than 0.5% over the next three sessions 43% of the time. But when the NDX has closed lower and underperformed the SPX during each of the last three sessions, the Nasdaq gained more than 0.5% three days later only 13% of the time, significantly below random. For this setup to be triggered Tuesday, the Nasdaq needs to close lower and continue to underperform the S&P heading into the close (currently the NDX is off 1.6% vs. a 1.3% drop for the SPX).